Thailand's spectacular economic performance until the mid-1990s earned it classification as one of the World Bank's ‘High Performing Asian Economies’ (World Bank 1993). In 1997, however, the country's financial meltdown triggered the Asian crisis. Analysts may differ as to the precise explanations for Thailand's economic performance, but all would agree that globalisation, in the form of significant and increasing exposure to regional and global markets for goods, services, and capital, has played a significant role in the country's successes as well as its problems. This chapter uses the case of Thailand to explore the impact of domestic institutions on economic upgrading efforts in the face of globalisation, with an emphasis on globalised product markets. More specifically, we highlight the necessity of market-conforming, domestic arrangements capable of resolving sector-specific and intersectoral coordination and distributional dilemmas inherent in economic upgrading. In this perspective, recent neoliberal calls for sector-neutral institutional strengthening are useful but insufficient for middle-income developing countries to advance in a more globalised environment.

Our emphasis on the real sector is not meant to minimise the weight of problems in Thailand's financial sector. But the financial crisis was itself in part a function of weaknesses in the real sector – of ‘too much foreign money chasing too few sound investments that were capable of earning foreign exchange sufficient to service the principal and interest on the debt’ (Jackson 1999: 5).